KEI Industries Limited (NSE: KEI) Q2 2025 Earnings Call dated Oct. 16, 2024
Corporate Participants:
Anil Gupta — Chairman and Managing Director
Rajeev Gupta — Executive Director and Chief Financial Officer
Analysts:
Rahul Dani — Analyst
Rahul Agarwal — Analyst
Nikunj Gala — Analyst
Nitin Arora — Analyst
Achal Lohade — Analyst
Manoj Gori — Analyst
Pulkit Patni — Analyst
Keyur Pandya — Analyst
Nikhil Kale — Analyst
Harshit Kapadia — Analyst
Rohit — Analyst
Arshia Khosla — Analyst
Sandeep Jain — Analyst
Amber Singhania — Analyst
Unidentified Participant
Sukant Garg — Analyst
Vaibhav Jain — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q2 FY ’25 Earnings Conference Call of KEI Industries hosted by Monarch Networth Capital. [Operator Instructions]
I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, sir.
Rahul Dani — Analyst
Yeah. Thank you, Joshua. Good afternoon, everyone. On behalf of Monarch Networth Capital, we would like to host the senior management of KEI Industries. We have with us Mr. Anil Gupta, Chairman and Managing Director of the company; Mr. Rajeev Gupta, CFO of the company. We will start the call with opening remarks from the management and then move to Q&A.
Thank you, and over to you, sir.
Anil Gupta — Chairman and Managing Director
Yeah. So good afternoon, everyone. Thank you very much. I’m Anil Gupta, Chairman and Managing Director, KEI Industries Limited. I welcome all of you on this conference call. I’ll give a brief summary of this quarter and first half.
Net sales in Q2 in financial year ’24-’25 is INR2,279.64 crores against INR1,945 crore last year. The growth in net sales is 17.21%. EBITDA is INR237.52 crores with a margin of 10.42% EBITDA oblig [Phonetic] net sales margin as against 10.88% in the same period previous year. Profit after tax in this quarter is INR154.81 crore against INR140.2 crore last year. So growth in the PAT is 10.42%. Profit after tax oblig net sales margin is 6.79% versus 7.21% in the previous year.
Domestic institutional cable sale, wire and cable is INR615 crore against INR511 crore with a growth of 20%. Domestic institutional cable sale, extra high voltage cable is INR73 crore against INR169 crore in the previous year. A capacity of extra high-voltage cable has been used for medium voltage and high-voltage power cables. So export sales in this quarter is INR241 crores against INR249 crore last year. The total institutional cable sale contribution is 39% against 44% in the previous year same period.
Sales through dealer network, dealer and distribution network is INR1,258 crore in second quarter against INR923 crore last year. Growth in this segment is 36%. B2C sale, distribution network sale has contributed 55% in the second quarter as against 47% in the previous year same period. EPC sale other than cable is INR8 crore against INR113 crore last year. Out of total sales of EPC — EHV/EPC sale is INR39 crores against INR44 crore in the same quarter last year. Stainless steel wire sale is in Q2 is INR59 crore against INR58 crore last year.
Now I will give a summary of the first half, that means April to September and net sales in H1 in this financial year is INR4,340 crore against INR3,725 crore last year. So growth in net sales is 16.5%. EBITDA is INR469.93 crore against INR398 crore, growth is 18% in EBITDA. EBITDA oblig of net sales margin is 10.83% as against 10.69% in the same period previous year. Profit after tax in H1 financial year ’24-’25 is INR305 crores against INR261.59 crore. Growth in PAT is 16.62%. PAT oblig net sales margin in six months is 7.03% versus 7.02%.
Domestic institutional cable sale growth is 19% in first six months at INR1,189 crore. EHV sale is INR152 crore against INR218 crore last year. Capacity of extra high-voltage cable has been used for producing HT power cables.
Export sales is INR474 crore, so the total institutional sale contribution in H1 is 39% against 44% in the same period previous year. Sales through dealer network is INR2,343 crores against INR1,765 crores, growth is approximately 33% against — through dealer network, that is B2C sale. The total acting working dealers of the company as on 30th September was approximately 2,038. B2C sale has contributed 54% in H1 as against 47% in the same period last year.
Volume increase in the cable division on the basis of production for — and for consumption of metals in H1 is — against as compared to previous year same period is around 14%. Pending order as on 30th — 13th October 2024 is INR3,847 crore, out of which EPC is INR603 crore, extra high-voltage cable INR301 crore, we are L1 in order of INR186 crore of Tata Power 220kV cables, which is yet to be officially come. Domestic cable orders is INR2,368 crore and export order spending are INR575 crore.
External rating. CARE has upgraded company’s long-term rating as AA+, long-term rating from India Ratings and Research Private Limited and ICRA is AA, short-term rating from India Ratings, ICRA and CARE is A1+. Book value — the book-value for per equity share of the company is INR382.96 against INR348.87 on March 31 2024.
The total borrowings in this — at the moment is INR314 crore, channel finance INR109 crore, cash and bank balance is INR245 crores, as against total borrowings of INR134 crore as on 31st March ’24. Acceptance of creditors as on 30th September ’24 is INR357 crore as against INR506 crore in March ’24. So the net debt is INR426 crores as on 30th September ’24.
During H1 ’24-’25, finance cost was INR27.49 crore against INR16.47 crore in the previous year same period. So the percentage of financial charges on net sales has increased in this period to 0.63% from 0.44% in the last year. Interest income from bank deposits, oblig, others in H1 is INR13.32 crore, which is included in the other income. It was INR9.83 crore in the previous year same period.
The future outlook of the company. During H1 of FY ’24-’25, company has incurred a capital expenditure of — capital expenditure payment of approximately INR312 crore in out of which Sanand INR169 crores, Chinchpada in Silvassa, INR48 crore, Bhiwadi INR25 crore, Pathredi, INR38 crore and other plants and locations INR32 crore.
Brownfield capex at Chinchpada and Pathredi to add further capacities of wire and power cable has been completed in H1 and fully commissioned. After the completion of brownfield capex, capacity utilized during H1 ’24-’25, approximately 78% in the cable division, 71% in the house wire division and 93% in the stainless steel wire division. This brownfield capex will enable us to grow by 16% to 17% in this financial year. Apart from the brownfield capex in FY ’24-’25, company has planned a total capex of — capex of INR900 crores to INR1,000 crores on greenfield expansion at Sanand for expansion for LT, HT and EHV cables in Gujarat. Commercial production for which will commence by first quarter of FY ’25-’26.
We have — we started the construction in FY ’23-’24. Further, we will spend another INR600 crore in the next financial years to complete the project to maintain a CAGR of 15% to 16% per annum as against achieved CAGR of 14% to 15% during the last 15 years.
So this is a brief summary. Thank you very much. And now you can come with any questions you may have and we’ll be pleased to answer it. Thank you.
Questions and Answers:
Operator
Thank you very much, sir. [Operator Instructions] The first question is from the line of Mr. Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Rahul Agarwal
Yeah, hi. Very good afternoon, Anilji and Rajeevji. Thank you for the opportunity. Sir, first question was on the QIP fundraise. Based on whatever cash flow projections we understand of the business and based on your guidance for fiscal ’25-’26, my sense was a INR400 crore to INR500 crore debt would have been suffice to incur all the capex given the internal accrual improvement for the business. And so could you explain, sir, what is the rationale and any change in the capex plan? Where do you plan to invest this money?
Rajeev Gupta
Actually, after the brownfield capex where we had already invested INR250 crore plus and the additional expenditure on the Sanand project wherein the INR1,800 crore to INR1,900 crore will be required to complete the full project by next financial year. So considering in mind, then while going for the term loan, if we take as a INR600 crores, which we have already sanctioned from the bank also, there will be another requirement for working capital loan also for the next financial year because if we spend all our cash accruals only for capex, then we need the further amount for working capital as well. So that’s why we thought that without having the further borrowing or additional borrowing, we should go ahead with this project if we raise some fund from the market. So that was discussed in the Board actually.
Rahul Agarwal
Okay, got it. So this — obviously my sense is working capital is — you’ve done a great job over years on the working capital side. So we’re still trying to get it down further. My sense is this INR2,000 crores obviously also have a growth angle to it. Any sense could you like to give some direction in terms of where most of this capital will get used for?
Rajeev Gupta
Yeah, as we said that we have — for the current year, we have the plan for Sanand itself is close to INR900 to —
Operator
The line for the management has been disconnected. I just go ahead and reconnect. [Technical Issues] The line for the management has been reconnected, you can go ahead.
Rajeev Gupta
Hello. Yes Rahulji.
Rahul Agarwal
Sir, you were answering the question for where will the growth capex be used for? That is where the line got disconnected.
Rajeev Gupta
Yeah. So this capex will be fully — so this fund will be fully utilized for the Sanand project mainly. And so that we will be having sufficient internal accrual to fund the additional working capital requirement for the ’26-’27 and ’25-’26.
Rahul Agarwal
Okay. Okay, fine, sir. Second question was on the quarter itself. It seems like the institutional sales and exports both have been weaker, while all the growth was driven by dealer sales, which is the channel sales. Could you help understand this better, what exactly happened? My sense is, this —
Rajeev Gupta
You see earlier also we are explaining that it does not matter to us whether export is increasing, retail is increasing, EHV is increasing, matter to us is how we are utilizing the capacity. So if the retail is pushing more in this quarter, so we have sold there. So ultimately, we need to utilize the capacity. So accordingly, our sale has already improved 17%, little bit impact on the EBITDA margin, mainly because of as we were earlier explaining that if the copper or aluminum prices get fluctuated, so in this — in one particular quarter, it gets increased or decreased, which will be adjusted in the another subsequent quarter.
So if you compare the last quarter, wherein the raw material consumption was lesser by close to 1%, the same gets adjusted in the same — this financial year. So once it is average out, if you compare the six month result, it is already averaged out. So there is no impact on six month or a full-year balance sheet.
Rahul Agarwal
So what it means is the margin which is whatever the —
Rajeev Gupta
For the full-year as Anilji has already guided that, our 17% growth will be there because we have the capacity to maintain that kind of growth and EBITDA margin will also be there as we have earlier guided 10.5% to 11%.
Anil Gupta
We have already — in H1, in six months, our EBITDA margin is at 10.88%. If we look at the total EBITDA margin of April to September.
Rahul Agarwal
Got it, sir. And lastly, one clarification on the volume growth for cable and wires. My sense is last quarter we did 18%. You said first half we did 14%. The 2Q volume growth looks lower. Any reason for that, please?
Anil Gupta
Because some of the — some of the materials could not be dispatched and in exports and as well as the EHV. So the finished goods inventory has increased. So it led to little — lesser sale and that’s why it is showing lesser metal consumption in the — in the sale.
Rajeev Gupta
But Rahulji, it will always be happening actually in quarter-to-quarter. As I said that on an average basis, we will be growing at a 17% CAGR. So quarter-to-quarter maybe up or down, but for full-year basis or half yearly or nine-month basis, on the basis of the accumulated sale, we will be growing at a 17% CAGR.
Rahul Agarwal
Perfect, sir. I understand that. Thank you so much for answering the questions. I’ll get back in the queue, sir.
Operator
Thank you. The next question is from the line of Nikunj Gala from Sundaram AMC. Please go ahead.
Nikunj Gala
Yeah, good afternoon, sir. Thanks for giving the opportunity. Sir, just on the QIP front, when we announced this greenfield capex and at that point of time, the requirement was INR2,000 crore. Even at that point of time, we were envisaging the incremental working capital requirement of the INR600 crore for the next two years. Considering the cash flow which we will be generating, still we will be having that kind of a surplus, then what’s the need to raise INR2,000 crore at this point of time? Because the same situation was there one year ago when we announced this greenfield capex also, right?
Rajeev Gupta
Yeah. At that time, the brownfield capex was not there to maintain the current year capacity addition and to maintain the sale growth of 17% in the current financial year, we need to go with the brownfield capex where we had already invested more than INR250 crore last year and in the current — first half. So that money has also gone. So that was not earlier plan. Earlier was the planning only for the greenfield capex.
Nikunj Gala
Right.
Rajeev Gupta
And now because of the expenditure going on and if earlier we were having the debt-free company. So now if we are going ahead with the same plan, then the debt will be there for term loan at least for INR600 crore and additional working capital loan for next financial year and in financial year ’26-’27 will also be there. So when the term loan and the working capital loan will be there, then the cash accrual will not be available for the future capex, which is behind ’26-’27.
Nikunj Gala
Okay. So out of this INR2,000 crore, there will be additional capex requirement for which we are raising this INR2,000 crore, like apart from the Sanand, is there a further plan?
Rajeev Gupta
Further. Every year we need to spend around INR500 crores INR700 crores in future so that maintain —
Anil Gupta
To maintain the growth.
Rajeev Gupta
To maintain the growth, because if we need to maintain a growth of 17% plus, we need to have the capacity in place well in advance because it takes almost two year before because we started this project last year and it will take two full years to execute or to reach at a level of sale.
Nikunj Gala
Okay, sure. And just one clarification on the TV interview, which MD gave in the morning. Is there a comment which there — which was made that after few months, we will again be looking for buyback of the shares. So that point was not clear.
Anil Gupta
No, no. Actually the — the anchor was asking that, will we be buying of the shares or will you increase your promoters holding by acquiring shares from the market? I said we will — after a few months, we will look at it. That was a — so the — actually the question was different. So we just said that we’ll look at it. That’s all.
Nikunj Gala
Okay, because we are raising money and then again buying back the shares, that doesn’t reconcile.
Anil Gupta
No, no, buyback is not the company — there is no question of buying back the share. They were saying that will you increase the promoter holding?
Nikunj Gala
Sure.
Anil Gupta
That was the question.
Nikunj Gala
Yeah. Okay. Thanks a lot for the clarification. Yeah. All the best.
Operator
Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Nitin Arora
Hi, thank you, sir for the opportunity. Just moving away from this QIP thing to the business side, can you talk about how is the demand — overall demand right now, given that you have such high visibility, putting greenfield also and I think you also talked about that we want to increase even the brownfield capex where that QIP comes into play. So has anything again materially changed? I mean, whatever the growth the industry is seeing is pretty strong, that’s what the sense you gave it last quarter in the con call as well. But has materially something changing where you’re seeing some more levers coming in and that’s the reason certainly it’s upsizing the capex or just your take on that.
Rajeev Gupta
Capex, we are doing, which we have already planned for it, only change in, instead of taking the debt, now we will not be taking the debt. That is the only difference. So that whatever capacity will be in place by ’26. So in ’26-’27 when the full capacity will be available to sale, the working capital will be required. So if we have already taken the loan and we have adjusted our cash accrual to the capex, then the working capital loan will also be there at that time.
So we thought that instead of taking the loan and addition of the loan in future, if we go with this kind of fundraising, so then the debt will not be there in the books, so interest cost will also be not there in the books, as it was not in the last year balance sheet. So that was the main.
So when the cash accrual will be available, we can start invested in the new plant which will be available capacity for ’27-’28 onward, because this plant will be generating close to INR5,000 crore capacity, which will be utilized only by ’26-’27 or ’27-’28 max. So the 17%, 18% growth rate is there and the market is available for that. Our order book position is evidence for that. The domestic cable power book is already INR2,368 crore and export order is INR575 crore and the retail is increasing. So if the retail is also increasing and the domestic demand institution side is also — order book is strong, only we are lacking behind with the capacity actually.
Nitin Arora
So that’s what my question was that. Can you elaborate a little bit more quantitatively? Let’s say the end market, obviously you said 17% is something we are looking on a growth side. But sector wise, because there is a thought process that after the election, the things have really slowed down, whether it’s the railways, whether it’s the other retail market. So just we wanted your take how you are looking at different pockets of the market, number one, which you always talk about. So if you can talk in a little detail segment sector wise, if you are seeing any slowdown or how you’re seeing the market.
And second, I think what is your guardrail in terms of net debt to equity? Where you are more comfortable as a promoter, because see the point is not that you are raising fund is an issue, the point is the surprise element because we were thinking that you will not eventually — the cash flow will be there and not requirement. So if you can throw some light what is as a promoter, as a company we are comfortable with that. So as an analyst, we can assume that, if you do beyond that much capex eventually that has to come from the promoter doing QIP and all. So just your take on the net debt to equity side, your guardrails.
Rajeev Gupta
Yeah, before answering by Anilji for the market demand, I will clarify that we want to run a debt-free company as we have earlier spoken for that also.
Nitin Arora
Got it.
Rajeev Gupta
So the same guidance for future also, because we want to run the debt-free company. So that’s why this fundraising option came into the picture. Now for the demand side, Anilji will update.
Anil Gupta
See, demand — from demand side, the solar renewable energy is having substantial demand, solar and wind both. Secondly, now the transmission sector also has a substantial demand coming up with the — I think Government of India had announced almost INR9 lakh crore worth of transmission evacuation plan for next six years. So those projects are coming up.
Then other sectors like lot of thermal power projects and this pump storage projects are in the — are there for which the cable demand is there. Lot of tunnel — highways tunneling and railways tunneling projects are there. Data centers are very strong. So demand scenario is strong and that is the reason that every company is showing good growth in the sales.
Nitin Arora
Got it. Got it, sir. It’s clear. Thank you very much. I’ll come back in the queue. Thanks a lot.
Operator
Thank you. The next question is from the line of Achal Lohade from Nuvama Institutional Equities.
Achal Lohade
Yeah, good afternoon, sir. Thank you for the opportunity. Sir two questions. One is any particular reason for the EHV weakness, is it entirely for the exports or how do we — how do we look at this particular sub-segment in terms of FY ’25 and then FY ’27 onwards, given the new capacity?
Anil Gupta
See sometimes, this is a segment which is normally only the government utilities in the transmission sector, they buy. So the little bit of variation in the demand, in the tender process, in the clearances at site for the execution are always there. Order book is there. But projects are not executable because of the ROW issues and non-clearances. Overall in the full-year period, it will improve. But sometimes even two years back also, we saw the similar situation and this year also, we are seeing similar situation. But overall period it will improve.
Achal Lohade
Got it. And just with respect to your comments on various sectors, right, renewable, wind transmission, etc. Is it possible to get a sense in terms of, in terms of our mix, KEI’s mix in terms of these sectors, possible to have that kind of a split at this point in time?
Anil Gupta
No, at this moment, it is not possible, but we can work it out tentatively. But this is very difficult to extract this so much of data because —
Rajeev Gupta
We are selling to EPC contractors.
Anil Gupta
We are selling to dealers, EPC contractors, and I mean sometimes we are not recording it in our system that for which sector this cable is going.
Achal Lohade
Understood. And just one more question. In terms of margins, do they vary basis — whether the sale is B2G, B2B or distributor through?
Anil Gupta
See margins are sometime 1% here and there. I think margins are similar in nature.
Achal Lohade
Margins are similar in nature. Okay. Even for exports, sir?
Rajeev Gupta
For the full-year margin, you will see the similar kind of thing which were the last year. You will not see any surprise for that, actually.
Achal Lohade
Correct. No, I was just quizzing on the —
Anil Gupta
Our margins are as per guidance, in the full six months or the April to September first half.
Achal Lohade
Yeah, no, I was not asking for that, sir. I was just trying to understand in terms of whether the margins vary whether it is domestic or export or within domestic, whether it is B2G, B2B or distributor sale.
Rajeev Gupta
Little bit, half percent margin here and there in export and dealer distributor versus the domestic institution.
Achal Lohade
Got it. And just one more –one last question if I may. With respect to working capital, how do you see that evolving over next couple of quarters? Would this normalize immediately or it will take couple of quarters to normalize?
Rajeev Gupta
Earlier, we have guided that our receivable will go down. So last year our receivable was 2.25 months, before that it was 2.4 months. So in this financial year, it will come down to 2.1 months. Inventory will be close to 2.25 months. In this first half, the inventory is little bit higher mainly because of the capacity increase. So the holding will also be increased for that period actually. But it will be by the third quarter, it will be again for 2.25 months which is right now is 2.4 months.
Achal Lohade
Got it. Thank you. I will fall back in the queue. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Manoj Gori from Equirus Capital. Please go ahead.
Manoj Gori
Yeah. Thanks for the opportunity, sir. Sir, couple of questions. In the opening remarks, Anilji highlighted like we used EHV capacity for HT. Can we throw some light like, because if you look at EHV margins would be relatively better versus HT. So what made us take this decision to actually [Indecipherable] more HT than EHV? Was it lower demand for EHV or anything in specific?
Anil Gupta
See, I have already mentioned that it is the inconsistency in execution of the orders because of the ROW issue and non-clearances from the utilities for executing the contract. That is why the EHV sale has been impacted. It will normalize. It is a pattern of this kind of work. Because sometimes road, because of the heavy rains, road cutting permissions were not there anywhere in the country. So how do you execute a project? We can’t manufacture and dump the cable at site. So these are the issues. On a full year basis, it will normalize.
So during then, you are not manufacturing EHV cable on a CCV line. We have to utilize that capacity to produce similar identical product which — for which it is capable of. These capacities are always alternate. They can be used for any type of cable.
Manoj Gori
Right, right.
Rajeev Gupta
Manoj ji, last year in the second quarter, we sold high tension power cable is INR271 crore. In the current quarter it went INR431 crore, mainly because of we utilize that capacity of EHV. With regard to the differential margin, so that is there for 4% to 5% margin differential is there but only INR70 crore, INR80 crore additional or INR100 crore additional sale for HT, it may be INR3 crore, INR4 crore margin, that’s it. But it will not be more.
Manoj Gori
Correct, sir. Thank you and like repetition of the answer. So my second question would be on the fundraising part. Sorry to follow up on that. If we look at the working capital requirement probably as you rightly highlighted, it would be close to around INR600 crores. Even if we adjust that we should be doing cash flow from operations of close to around INR1,200 crores to INR1,300 crores during FY ’25 and ’26. And we are raising — we are planning to raise somewhere around INR2,000 crores. Any other plans, other than this greenfield and brownfield capacity additions that we are looking at currently?
Rajeev Gupta
See, next year our cash outflow for the Sanand project itself is INR600 crore and our cash profit is practically close to INR700 crore to INR750 crore. So there is no room for working capital, additional working capital requirements. So that’s why once we have assessed now because now our project is almost in the halfway for completion and within seven to eight months we will be start selling from there. So then we require additional working capital also.
Manoj Gori
Right, right. Understood. And sir lastly just in continuation with the previous questions, first half —
Operator
May I request you to rejoin?
Manoj Gori
Sure.
Operator
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Pulkit Patni
Sir, just one question. Historically you’ve said that you want to over time reduce the EPC business and it’s been very volatile. So could you give a sense of how should we be looking at our EPC business going forward? Because the revenue fluctuations happened to be pretty wide in that particular segment.
Rajeev Gupta
In EPC, we have already reducing the sale quarter and in the current year, our EPC will not be more than 5%, 6% sales.
Anil Gupta
We have already substantially cut down the EPC business.
Pulkit Patni
No sir, I understood that but because there’s a lot of quarterly volatility. So just, wanted to understand that like the —
Anil Gupta
See the quarterly volatility is there because of the site situation, heavy rains were there and there was no ROW permissions anywhere wherever the projects are going on. So — and these are — these are all projects are executed in the open areas because our distribution strengthening projects. So that is why the sale has also gone down. And we are not taking — we have to take one order in a year to maintain a section of staff, otherwise the — all outstandings also we have to maintain the projects which we have done in the past as a warranty and also recover the payments from the old projects. So we have to maintain a certain amount of staff and to keep them engaged, we just take one order in a year.
Rajeev Gupta
Normally close to INR250 crore to INR300 crore will be the sale for a year from the EPC division. And slowly, slowly it will get away once our — you see our collection has already reduced. Earlier it was INR340 crores with that. So now it has already reduced less than INR250 crore or debtor level from EPC. So slowly, slowly the business is going down and the debit — and the debtor level is also going down.
Pulkit Patni
Okay. This is useful. Thank you, sir.
Operator
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance Co. Limited. Please go ahead.
Keyur Pandya
Thank you. Two questions. First on the capacity side. So this probably INR1,000 crore potential revenue capacity in Bhiwadi would help us grow in say FY ’25. So what will drive — do we have enough capacity to grow in FY ’26? That is first question.
And second question, from the balance sheet perspective, you mentioned that you would want to keep your balance sheet debt free. If I just take ballpark 15%, 16% kind of growth say for next two, three years, annually INR1,500 crore to INR1,700 crore kind of incremental sales would be required. And that will require incremental capex plus working capital of around INR800 crore, INR900 crore considering capex plus working capital.
So now is it fair that — if the annual requirement of capital is INR800 crore, INR900 crore, till that time you won’t raise further funds going ahead also, basically when your OCF or operating cash flow meets your capex plus working capital requirement, there won’t be any fundraise?
Rajeev Gupta
No. This fundraise, we have already explained that considering in mind to be a debt free company. So out of the total fundraise, we will spend major amount only on the Sanand project. With respect to the growth of 17% plus growth, we have the capacity for current year as well as we have the capacity for the next financial year. By the time the next financial year, the Sanand project will be fully operational. So part growth will be coming from the Sanand and part growth will be coming from the balance capacity for the current financial year.
Keyur Pandya
Just clarification, so next year’s growth, part of it depends on the — say commissioning of the Sanand plant, correct? And that commission —
Rajeev Gupta
Sir, irrespective of anything, we will be growing at 17% plus. Because that kind of capacity we have already created in our existing divisions. For the Sanand project for your consumption, we have taken only additional growth of INR900 crore, that’s it, from the whole project, for the next financial year. Rest will be coming from the existing capacity, which we have already implemented. So that’s why we are quite confident that we will be growing 17% plus for next financial year also.
Keyur Pandya
Noted. Okay. I will get back in the queue. Thank you. All the best.
Rajeev Gupta
Thank you sir.
Operator
Thank you. The next question is from the line of Nikhil Kale from Invesco. Please go ahead.
Nikhil Kale
Yeah. Thank you, sir. Just one clarification I had. So you talked about like project capex for FY ’25 and ’26 in Sanand. Can you just help us understand what is the total capex rate, at the company level, what is the total capex that you’re planning for this year and next year including maintenance capex that you —
Rajeev Gupta
This year will be — total capex will be close to INR1,100 crore plus. And next year the total capex will be INR600 crore to INR700 crore, including the maintenance capex.
Nikhil Kale
Okay. And just from my understanding, steady state, I mean what — how should we look at maintenance capex? Is it like as a percentage of sales typically how much —
Rajeev Gupta
Maintenance capex is close to INR50 crore in our existing locations, not —
Nikhil Kale
Okay. Understood. Thank you. That was my question.
Operator
Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. [Operator Instructions] Yeah. Thank you. Please go ahead.
Harshit Kapadia
Yeah. Thanks for the opportunity and congratulations for a very strong result again. Just wanted to clarify, on the Sanand plan, we are spending INR900 crores and that will only be for the cables manufacturing, no wires would be manufactured, right. And secondly within cables, what proportion would be EHV, LT and HT. Could you give us some color on that, sir?
Anil Gupta
See EHV and LT have similar plant and machinery and there were — they are always replaceable in terms of capacities. So we have not — for any segment of the reason, we have never kept any our capacity idle. So secondly, LT cable. I think later on we can give you the — you can explain.
Rajeev Gupta
Yeah. For the Sanand, the total capacity will be close to INR5,000 crore. Out of that close to INR1,200 crore to INR1,300 crore belongings to the extra high voltage. Close to INR1,500 crore belonging to the high tension power cable and balance will be for low tension power cable.
Harshit Kapadia
And HT and EHV is fungible. So that will be INR2,700 crore. If — let’s say if you want to do completely HT or completely EHV.
Rajeev Gupta
No, no. It’s only one way around. From HT, we cannot make EHV, but from EHV we can make HT. So basically EHV will be limiting to INR1,200 crore to INR1,300 crore. But HT may be INR1,500 crore to INR3,000 crore.
Harshit Kapadia
Understood. Fair enough. Thank you and wishing you all the best.
Rajeev Gupta
Thank you, Harshit.
Operator
Thank you. The next question is from the line of Shrinidhi Karlekar from HSBC. Please go ahead.
Rajeev Gupta
Yes, Shrinidhi. Hello?
Operator
Sir, the participant has left the queue. I’ll just reconnect. Yeah. May I request Rohit from Nvest Analytics Advisory LLP to go ahead.
Rohit
Hello. Am I audible, sir?
Anil Gupta
Yes.
Rohit
Our year-on-year has been impacted. Could you please provide some specific reason for this? Are we seeing increasing?
Rajeev Gupta
The specific reason is because of — because of the volatility of the metal prices, raw material consumption increased by 0.5% to 1% [Indecipherable] which was less in the last quarter. So because of that if we — if it is average out then it is common. So for six months there is no impact. For quarter to quarter it is impacted.
Operator
Thank you. The next question is from the line of Arshia Khosla from BOB Capital Markets. Please go ahead.
Arshia Khosla
Yeah, hi, thanks for taking my question. Sir, I just wanted to understand on the export side. So in the previous quarter, [Indecipherable] declined because of some logistical issues at the customer end. So any — if you would just highlight something for this quarter have been — have they been resolved or —
Rajeev Gupta
Export, earlier we have guided to maintain for 12% to 13% for the full year level. Already we are having a 11% export contribution in the first half. So we will be maintaining 12% to 13% depending on the order we are having. And it does not impact our overall sale whether export is higher or retail is higher or the domestic institution is higher. As long as we are growing, overall 17% plus so we are utilizing our capacity.
Arshia Khosla
Okay. Thank you. And sir, I just wanted your order book bifurcation.
Rajeev Gupta
Pardon. You are — you want the pending order?
Arshia Khosla
Yeah. The order book bifurcation, the pending order —
Rajeev Gupta
Yeah. So pending order is EPC division order book which is INR603 crore, extra high-voltage power cable order book is INR300 crore and cable from domestic institution order book is INR2,368 crore and export cable order is INR575 crore. So put together is INR3,847 crore. And out of the — and apart from this, we are having L1 in INR186 crore order for extra high-voltage power cable. So order book is very strong.
Arshia Khosla
Yeah. Can you please — pardon [Phonetic] the L1 number?
Operator
I’m sorry to interrupt. Ma’am, can you please rejoin the queue?
Arshia Khosla
Sure.
Operator
Yeah. Thank you. The next question is from the line of Nikhil Kale from Invesco. Please go ahead.
Nikhil Kale
Thank you, sir. Just one follow-up. So yeah, it seems you’re looking at the next phase of growth, when you’re looking at the QIP fundraise beyond like FY ’27, FY ’28. Just wanted to understand that this next phase that you are kind of envisaging, would it be more like a greenfield or would it be more of a greenfield or is it brownfield wherein you have Sanand — space in Sanand and it will be kind of expansion there?
Rajeev Gupta
It will be both actually, because once this plant will be operational, then automatically there is a lot of scope to improve the capacity over there by balancing of equipment. That is our past experience. So we will do that. And apart from this, we will go ahead with the future capex for the greenfield also. We have already bought land in Baroda, which we are in the process to acquiring and within six to eight months time, we will be having a sufficient land for the further growth.
Nikhil Kale
Okay. Understood. Thank you.
Operator
Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead.
Nitin Arora
Sorry sir, just one follow up. As you stated that we always want to be now a debt free company. The cycle of capex will continue. So I just wanted to know your thoughts that if a capex given the first round will happen now, the brownfield and the greenfield both. And eventually we keep spending INR400 crores to INR500 crores until as we decide after three, four years, another greenfield.
So now when you have done your maths, how one should look these debt-free argument? Because when you put your new capex, let’s say greenfield comes after two years where you decide to put another one. Now we are confident that this will remain as a debt free or that time also eventually the working capital will always remain, right? That is the nature of the business. And that time also you will say that, okay, suddenly we didn’t envisage the working capital that time. But now the working capital also needs to be done.
So this argument which you’re giving off debt free, what we wanted to know this is something even a new greenfield announced after two years or three years that we are sticking to.
Rajeev Gupta
Sir, we have calculated the projections for next five to seven years. Accordingly, we have taken this decision, so we will not require for any further amount either from the debt or from the fundraising, for the future growth of 17% plus.
Nitin Arora
Got it, sir, thank you very much.
Operator
Thank you. The next question is from the line of Sandeep Jain from Baroda BNP Paribas MF. Please go ahead.
Sandeep Jain
Yeah. Partly has been answered in previous question of Nitin. Just one clarification means, in terms of if I look at the debt raising part, right, FY ’24, we have done somewhere around INR800 crore of free cash flow. So just wanted to understand the thought process that even at a 17% growth and even if we don’t take any equity raise now, whatever the debt we required in FY ’25 or FY ’26 that can be paid off by FY ’27, right, because of the cash flow generation ability.
Rajeev Gupta
No, then the growth will be sacrificed. If we take the debt and we use the cash accrual for the debt repayment then from ’27, ’28 onward, from there —
Sandeep Jain
We can raise at that point of time That is the only point which I am trying to understand.
Rajeev Gupta
So if we would like to defer that, so that we can defer then that will be along with the risk attached for the interest and repayment also. Because if INR600 crore for term loan and the INR600 crore for working capital. So the interest cost will be there. The repayment of term loan will be there. So it will impact the future investment.
Sandeep Jain
So currently we have a net debt of INR69 crores, INR70 odd crores kind of thing if I remove the acceptance, right?
Rajeev Gupta
Yes. So you see, acceptance is basically the interest bearing. Because we [Technical Issues] from Hindalco, Vedanta or anywhere else, it has to be through the letter of credit. Letter of credit is bearing the interest. So then the interest cost will be there.
Sandeep Jain
Okay. No, that I understood.
Rajeev Gupta
If we are buying through the cash, so then also there will not be that any interest cost.
Sandeep Jain
No, that I understood that that will always be there whether you raise the fund or don’t raise the fund, the acceptance will bear the interest. That will be the pack and parcel of the business, right. You cannot just — you kind of substitute that.
Rajeev Gupta
In last two to three years — three, four year before, acceptances was INR900 crore. It has reduced. It has reduced substantially. Only in the current year, it has again increased little bit. But otherwise acceptances were very less to only INR200 crore only for import. For the domestic purchase, we were using the cash because we were having the cash in our books.
Sandeep Jain
So as a management when you take a debt, you include the acceptance also that acceptance also be zero.
Rajeev Gupta
Yes, yes. INR426 crore debt. That is a net debt.
Sandeep Jain
Okay.
Rajeev Gupta
Including acceptance. In my presentation also we have shown those numbers.
Sandeep Jain
Okay. Thanks. Fine.
Operator
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance Co. Limited. Please go ahead.
Keyur Pandya
Thanks for the opportunity again. Sorry to harping again on the fundraise. Just — and the question is being asked because the promoter holding is already below 40%. So the thought is that the working capital requirement that you mentioned for the incremental INR5,000 crore of sales. However that will be gradual, say every year probably incremental INR250 crores to INR300 crores kind of working capital requirement would be there based on the 15%, 17% growth number. I mean, that is not one-time requirement will come gradually whereas the fundraise would be one-time front loaded and that would impact the — basically ROCE and balance sheet. So just wanted to understand just like previous participants suggested, can we do it at the time when it is actually required? That is first.
And second, just on the export side, are we seeing any structural challenge since export is slow for you as well as for other players for last few months. So just more color on the export. Thanks.
Anil Gupta
No, I think there is no structural problem in the exports. So yeah, it is taking time to pick up but I don’t see any problem going forward in the growth of exports.
Rajeev Gupta
[Speech Overlap] Sir, with respect to fundraise, we have already explained the situation, why we want to raise the fund. So that we will be having the capex funded through the fundraise and whatever cash accrual will be there will be available for the working capital for next financial year.
Keyur Pandya
Okay. Thank you.
Operator
Thank you. The next question is from the line of Amber Singhania from Nippon India AMC. Please go ahead.
Amber Singhania
Yeah, hi sir, thanks for taking my question. Just one clarification, I am looking for. You mentioned roughly around INR2,000 crore kind of capex in Sanand plant which will give you INR5,000 crore kind of revenues. That works out to be around 2.5 times as it turns. Just wanted to understand, isn’t it too low compared to what we are already enjoying or what we are already delivering as well as what we are seeing in the other industry players are achieving. Isn’t it too low on that?
Rajeev Gupta
It is mainly because of the extra high voltage measure capacity we are going to add over there wherein heavy structure or building heavy machines and heavy testing equipments and heavy cranes are there. So only in extra high-voltage power cable, the asset turn is less than 1:2 but otherwise normally it is practically 1:3.5 nowadays.
Anil Gupta
Because nowadays the cost of creating assets as compared to what we have previously created has substantially changed. Over last whatever factories we built up five years back now, you know the construction cost has doubled. Plant and machinery has almost gone up, almost doubled. So the — but after once the factory is built, there are always scope to improve the production and productivity by adding some balancing machines. But that happens only once the production starts.
Amber Singhania
Because you are mentioning that even after that INR500 crore to INR700 crore kind of run rate will continue, what I understand is current capacity is sufficient for ’25 and ’26. The Sanand capacity will suffice you for ’27, ’28 despite that we will be doing another 500 each year on ’27 and ’28 for the capex. So just wanted to understand, is the asking rate going forward apart from Sanand factory as well is —
Rajeev Gupta
Apart from Sanand factory whatever we will spend, we will spend for the new facility which will take another two years to implement. Because we need to spend two years before then only we will have the capacity in place after two years. So whatever we will spend in ’26, ’27 and ’27, ’28, the capacity will be available in ’28, ’29. So — that’s why we always prepare a plan for the next five financial year. That’s how we are doing a 17% kind of growth for each — for the each five year.
Amber Singhania
Got it. And sir, and I know it is slightly premature, but can you also highlight the new capacity which we are planning after Sanand plant? That would be in the line of EHV side only or it will be —
Rajeev Gupta
No, it will be — it will be for low voltage and medium voltage, it will not be EHV. So there the cost of the project will not be that high that is there in Sanand.
Amber Singhania
Okay, fine sir. Thank you.
Operator
Thank you. The next question is from the line of Raman KV from [Indecipherable]. Please go ahead.
Unidentified Participant
Hello, can you hear me?
Anil Gupta
Yeah, we can hear you.
Operator
Thank you. The next question is from the line of Sukant Garg from Equible Research Private Limited. Please go ahead.
Sukant Garg
Hi. So most of my questions have been already answered. I just wanted to know one thing that which are the major sectors that we are currently serving? And if not the customers, exactly which sector is going to be the major focus in the next quarter or the coming quarters?
Anil Gupta
See, the sector will be energy sectors, especially solar, wind or other power generation sectors. Transmission and distribution sector in the power and data center. But this is just tentative focus — our focus remains on every sector, wherever the demand is there, wherever — because we have channel partners, we have sales team everywhere. So whatever opportunities are there, all opportunities are tapped. It is not a question of that, we just focus on — because we are manufacturing cables for all sectors, but the focus — the major demand drivers will be solar, wind or energy sector basically.
Operator
Thank you. Ladies and gentlemen, this will be the last question that will be from the line of Vaibhav Jain [Phonetic] from an independent investor. Please go ahead.
Vaibhav Jain
Hi sir. Am I audible?
Rajeev Gupta
Yes, Vaibhav.
Vaibhav Jain
Yeah, hi sir, just new to analyzing your company and the business, I just wanted some clarification on channel finance and acceptances. What kind of debt is this? What kind of cost of debt? And what are some of the —
Rajeev Gupta
In the case of channel finance, the cost is borne by the dealer itself and we are giving them the cash discount. In the case of acceptances, the interest rate is close to 7% to 8% per annum.
Vaibhav Jain
Okay sir, thank you. Most of my other questions have been answered.
Rajeev Gupta
Thank you.
Operator
As that was the last question, I’ll now hand over the conference over to the management for closing comments.
Anil Gupta
So thank you very much for having interaction with us on this conference call. If you still have any further questions, you can reach out to us. Thank you very much and look forward to working together. Thank you.
Rajeev Gupta
Thank you very much.
Operator
[Operator Closing Remarks]